The problem with Treasury

Dr Eric Crampton
20 September, 2018

Treasury’s latest stakeholder survey shows that I’m far from the only one worried about declining economic capabilities at the Government’s lead economics advisor.

Keeping all the stakeholders happy is an impossible task for any organisation. In a world of opportunity costs and fixed budgets, making one group happier will invariably upset someone else.

It’s an even more impossible task for an organisation like Treasury, whose unique role in the public sector is adjudicating across different Ministries’ competing claims on the Budget. Doing that job well will always upset Ministry advocates for policies that might not have made the grade in that year’s Budget.

And so it is always a bit difficult to interpret the results of stakeholder surveys for organisations like Treasury where many of the surveyed stakeholders could hold grudges about negative reviews of their favourite programmes.

Even taking that into account, Treasury’s 2017 Stakeholder Survey is a worry.

Treasury conducts stakeholder surveys every two years. Two weeks ago, under an Official Information Act request, Treasury released its most recent Stakeholder Survey, undertaken by Colmar Brunton in August 2017. Prior years’ surveys were released on Treasury’s website within two months of completion; the most recent took a year to release.

Less satisfied on every indicator

The survey shows declining stakeholder satisfaction with Treasury’s performance on every headline indicator.

For a lot of the indicators, decline is not a particular worry. Fewer people reported noticing differences in the way Treasury behaves and how it expresses itself, for example, but that could be a good thing if people had been happy with both to begin with.

Similarly, a large decline in agreement with Treasury’s viewpoint could either mean Treasury has been offering more sound but unwelcome advice, has done a worse job in the political management of communication around sound advice, or has been offering worse advice.

Making sense of it requires going a bit deeper into the survey and adding some context.

A minority of economists

Treasury’s annual reports show the quality of Treasury’s policy advice has declined since 2012/13.

Because I was worried about declining economic capabilities at Treasury, with good economists leaving and fewer new recruits coming with training in economics, I asked about the qualifications of Treasury’s staff.

Treasury told me that analysts with training in economics are in the minority. Among staff employed as analysts, senior analysts, principal advisors, and senior managers whose qualifications are known, 68 had training in economics or finance, 75 did not, and the qualifications of 107 were unknown. In 2017, only four of 24 newly hired analysts had training in economics.

Treasury’s stakeholder survey provides a way of checking if those who interact with Treasury have noticed any consequent decline in Treasury’s capabilities.

In prior surveys from 2011 to 2015, perceptions that Treasury staff are well-informed ranged from 74 percent to 76 percent. That dropped to 66 percent in the 2017 survey. Confidence that Treasury staff do a good job ranged from 74 percent to 77 percent - until 2017’s 68 percent. And the drops in satisfaction have been greatest among those who interact with Treasury about its core business of economics, macroeconomics, and fiscal projections. There, satisfaction dropped from 70 percent in 2015 to 47 percent in 2017.

'Coherent intellectual leadership required'

Comments highlighted by Colmar Brunton was often harsh. One noted that “the Treasury staff are personally a pleasure to work with, but they don’t have a strong background in economic analysis.” Another pointed to the need for “coherent intellectual leadership from its senior staff”.

When Treasury’s stakeholders were asked what Treasury should be doing to improve performance, the second most-commonly cited answer was building economic capabilities.

The released documents included the presentation to Treasury’s executive leadership team on the stakeholder survey. That presentation noted the identified deficiencies in staff abilities in economics and asked “What does this mean for lifting our economics capability? Our Vote analysis capability? Our recruitment?”

Those are excellent questions. Coming up with an answer to them was part of the reason Treasury provided me for having sat on the stakeholder survey for a year rather than releasing it in accordance with prior practice. They said they had not wanted to release the survey until they had an answer for staff about how they were working to improve things. Treasury’s management wanted to prepare a response and share it with staff prior to releasing the survey.

'We're doing something about it'

Treasury’s response notes that Treasury has now put in place a work programme focused on economic capability, including training and developing existing staff and recruitment for economists.

But in the 2019 recruitment round for graduate analysts, while ten of fifteen had at least some background in economics, only four had at least Honours-level training in economics or finance. The recruitment process did little to distinguish candidates with an undergraduate minor in economics as part of another degree from those candidates with a Masters or Honours degree in economics.

And Treasury does not have any comprehensive way of tracking staff capabilities. It simply does not know if it is losing more trained economists than it is hiring. One wonders how Treasury would ever be able to tell whether it had succeeded in lifting its economics capabilities.

'Focus on the core business'

This matters. While a wide range of skills are required in policy analysis, Treasury’s unique role as lead economics advisor to the Government requires having substantial depth of economics capability. Treasury has to be able to apply a rigorous economic ruler across proposals coming from the other Ministries and to provide sound economic advice to its Minister and Cabinet.

That advice need not always be decisive, but it should always be reliable. And while that advice could often annoy Treasury’s stakeholders in other Ministries, they should not have reason to question Treasury’s competence in producing it.

Keeping all the stakeholders happy would be impossible. But doing a good job in Treasury’s core business is not. Treasury should focus on it.

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